Boutiques vs. Bulge Bracket, Part I
“I work for a boutique investment bank,” responded Todd cockily, smirking and now pulling up his pants over his temporarily retreated beer-gut, illustrating that this was one of those hardcore New York male-anorexia and exercise weeks. He would be spilling out of pants next week no problem after this weekend’s depression-gorge.
Todd paused and collected himself. “Yeah, I mean, I just really wanted to be closer to the deals, you know. Get more exposure.”
-The Boutique, Leveraged Sellout
When most people out there decide they really want to do investment banking, they usually go for the big names first: Goldman Sachs, Morgan Stanley, even UBS LA.
But occasionally someone asks me about the boutiques out there, whether they’re referring to the “top” ones like Evercore and Lazard, middle-market banks, or true regional boutiques that just have 1 or 2 offices.
Going to a top name is just not an option for everyone. If market conditions are bad, if you have no previous finance experience, or if you are trying to switch into investment banking from engineering or law or other fields, you might have to go with a boutique.
But are there any cases where a boutique would actually be preferable to a bulge bracket? Should someone actually want to go to one?
The Main Difference Between A Bulge Bracket And A Boutique
People most commonly cite the size of deals as the difference. While Goldman Sachs may advise on multi-billion dollar acquisitions, a boutique will usually stick to deals under a billion dollars and often far less than that. In the world of corporate finance, $50 million is chump change.
Other commonly cited differences are working in smaller groups, getting more responsibility, and being more than just a “number-cruncher” at a boutique.
While these can be true sometimes, the main difference at the Analyst level is that your boutique experience will be much more random.
Fooled By Randomness
Make no mistake: you can get tremendous experience at a boutique and learn more about actual deals than you might at a bulge bracket. But you might also spend all your time creating pitchbooks and doing useless work if the senior bankers can’t make rain.
I’ve seen both scenarios. One friend at a boutique basically learned the entire job in 3 months because he was effectively running a deal by himself.
Another friend spent most of his time making pitchbooks, making coffee (no administrative staff, thank you very much) and did deals that were so small he never learned much.
Don’t assume that you will get a “better experience.” Your chances of getting good deals to work on and having good exit opportunities are much higher at a bulge bracket.
Ok, But Is It The End Of The World If I’m Working At A Boutique?
No. But if you do go that route, you should very carefully investigate the work environment, dealflow, and everything else before you jump into it blindly. To get a more accurate view, try speaking with Analysts and Associates rather than higher-ups.
No matter how much diligence you do, however, the sad fact is that there will be time lag between when you interview and when you start, and a lot can change in a year… or even a few months.
Even at a great bulge bracket office like UBS LA, the departure of a few “stars” caused much havoc, and the effect is only more pronounced at a much smaller investment bank.
Still, you should do your homework as much as possible.
But Still, Is There Any Reason I Would Want To Work At A Smaller Bank?
I strongly recommend that you spread your net wide and consider all your options. Unless you have some kind of personal connection at a boutique, though, there is little reason to prefer it to a big name bank.
Lifestyle is typically not much better. Yes, sometimes there are one-off cases of Analysts only working 60 hours a week… at certain offices. But at the “top” names like Evercore, investment banking analysts work bulge bracket hours. And once you get up to around 80 hours a week, there’s honestly not much difference between 80 vs. 90 anyway.
You will have exit opportunities, but you are more limited because certain firms always go to bulge brackets first, so Analysts there will get preferential treatment.
At top boutiques and middle-market banks, the pay will be comparable to bulge brackets, but at smaller regional places, it can actually be significantly less… as in, 50% less in some cases.
The only situation where you might want to pick a boutique instead is if you have offers from multiple banks, are reasonably confident the boutique will give you good work, and just like the people or work environment a lot more after thorough investigation. Your team is important, and great experience is not worth it if you want to shoot yourself repeatedly because you hate your co-workers.
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Tags: boutique investment banks, bulge bracket, investment banking, investment banking analyst, investment banking exit opportunities, middle-market
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The more you write about UBS LA, the more I regret not applying there (I applied to the UBS tech group in SF and didn’t want to apply to multiple locations within a bank).
How do you feel about applying to multiple divisions/locations to a particular bank?
The UBS Tech group in SF is much better than LA, at least lifestyle wise.
Applying to multiple divisions/locations is generally fine, but I would not apply to multiple locations of the same division, e.g. NY and SF for one group. Really depends on the bank, though, some make a big deal over it and some don’t.
Where would Barclays capital fall, I’m working for them this summer, and am not sure which group is better and which is not. what do you think the exit opportunites would look like there? I keep hearing mixed things and don’t really know to to interpret it all. Also, you say “networking” but how do you really start networking whne you don’t know what to ask, what to put in an e-mail without coming off wanting a job?
Hi lori,
Barclay’s is an interesting case. It’s not very well-known for investment banking but highly regarded for trading and some other areas. I think it would probably be comparable to middle-market banks in terms of exit opportunities.
As far as networking, I would just be yourself and say you’re curious and interested in the industry. Anyone working there will know you’re looking for a job, so I wouldn’t try to hide it. Just ask about their career paths, personal experiences, what they like/don’t like, etc.
Hope this helps!
This is obviously not the case anymore, as Barcap has moved from a top player in Global Capital Markets into M&A after Lehman. I would say they are a clear BB now and going forth. Thoughts?
Yes I would agree. This article was written before the apocalypse…
I got out of school a year and a half ago (undergrad), and have been working for a rather large financial advisory practice in Orange County, CA. I am leaving the firm to pursue a career in ibanking. Since I did not go to a top university and have no experience in the banking industry, I’m thinking the boutiques are my only option. Is this an accurate assumption? I have a BS in Finance and have had much relevant experience in equity and debt valuations. I am also currently taking an ibanking training course. Do you have any thoughts or suggestions? Thanks
Akash: if the economy were better, you would have somewhat of a shot at bulge brackets. With things the way they are though, tons of people are getting fired at every level and at firms of different sizes currently… making it hard to get in anywhere at the moment.
Without any banking experience or a top university degree, I would agree that boutiques are your best shot currently. If you had a great connection at a bulge bracket that could help you get in, but otherwise I would focus on getting into boutiques.
Akash,
I’m getting ready to graduate from UC Berkeley right now with a degree in economics and am looking to take an ibanking training course. Could you tell me from which institution you are taking it and if you recommend it?
Based on this article, are you implying that working for a “top” boutique is better? Would you take Lazard/Evercore over GS/MS/Mer? I, like you, have heard of the great exit opportunities at Lazard and Evercore
Mike: I would put Lazard/Evercore in the same “class” as GS or MS or any other bulge bracket. I don’t think they’re better or worse, just equally prestigious.
Whether or not I would take one of those over a bulge bracket would depend on the group and people more than anything else.
What exactly is an exit opportunity?
MG
http://www.mergersandinquisitions.com/investment-banking-exit-opportunities/
hi
i’ve been reading your post above, very interesting about the exit opps. how hard is it for someone from boutiques like evercore, greenshill, lazard to move on to private equity house?
also what are the chances of moving from boutique to bulge bracket from say, analyst/associate position?
Not hard at all in either case.
It’s a little different too, if you’re coming from industry–sometimes your choice is really limited to boutiques that deal with your industry–healthcare/biotech being a prime example.
That’s true, and especially these days they are increasingly becoming the only option available…
Just joined a boutique investment bank in NYC after a few years at a bulge bracket. Greatest decision I’ve ever made (not that I had a choice, the market is pretty bad right now). But money and perks are amazing, deal flow is healthy, and lifestyle is fine.
Only drawback, I’m still working long hours including weekends, and still dealing with the typical a$$hole MD.
>>The only situation where you might want to pick a boutique instead is if you have offers from multiple banks, are reasonably confident the boutique will give you good work, and just like the people or work environment a lot more after thorough investigation.<<
Isn’t that the “only” situation where you would pick any job over any other job? The reality is, as with any major decision, you have to decide what’s important to you.
A pertinent consideration, in light of what’s happened in recent months, is job security. A lean and mean boutique M&A shop is going to be more likely to weather a down economy and lighter deal flow without layoffs than a bulge with a whole bullpen full of analysts in every office location.
Look at who the MDs are at any given boutique. If they went to good schools and had success in the bulges or in corporate finance, they probably chose their current predicament, rather than it being a “last resort.” That probably means they do good work, and can teach you a lot. I have never heard anybody dispute that a boutique will give a beginning analyst more holistic exposure to all elements of the dealmaking process. Within my first month at a small (10 person) shop, I was on conference calls with CEOs and CFOs, which would simply not happen at a bulge. But yes, you will face prejudice from some people who only want to hire out of a bank they’ve heard of. But then, those people are idiots and you’re better off not working for them anyway.
Whats the compensation like at Botiques for analysts typically? And directors?
Usually half of what it is at larger banks… but it drops the higher up you move, i.e. no boutique would pay an MD $10MM (in most cases)
In your opinion, which would give you a better shot at getting into a middle market PE firm and why? MBB consulting or IBD at a decent-sized boutique?
IBD, because PE firms rarely hire consultants in general – no matter how good the name is. IBD and PE are almost exactly the same whereas consulting is quite a bit different, so IBD is almost always a better bet unless it’s a completely unknown bank.
So if i fail to get an offer at an NYC BB, would the location of the boutique I ended up at matter in terms of PE future? For instance, would wachovia in charlotte, sun trust in atl, or some boutique in SF/Chi make it significantly harder to move into PE than a similar boutique in NYC?
I know that NYC BB is your best bet, but if I end up at a boutique I would rather live somewhere outisde of NY if it didn’t significantly hurt my chances of moving to PE.
The main difference is that you will be more limited with geography then. For example, boutiques in Atlanta/SF/Chicago would more likely lead to smaller PE firms in those areas – it would be very difficult if not impossible to go to huge PE firms in NYC after.
I don’t know that this is always the case. I’m currently interning at a PE firm and one of the key partners used his background in consulting to leverage a job in PE. While it is true that IB and PE are more similar than consulting and PE, the diligence process when looking at potential investments often requires the creativity and broad industry exposure that consulting provides. Additionally, the interaction that often goes on between PE and consulting companies via PE companies requesting consulting services for portfolio companies provides a great way to establish contacts for future employment in PE.
It happens, but just looking at statistics it is much less common for consultants to get into PE vs. bankers who do it. PE firms are very skeptical of consultants’ finance skills which is always the #1 problem.
Hi, I love your site! What do you think about the newly merged Wells Fargo/Wachovia? They are pretty dedicated to growing IBD and they are doing quite well so far in the league tables (top 10 for equity and M&A for U.S.). What do you think the exit opps are for this new firm, they seem right smack between a BB and a top MM so what would you say it is? Everyone that I talked to at the firm says its a BB but I’m not quite sure. What would you say exit opps are for this top 10 bank?
Too new to say. I would guess better than middle-market / boutique firms but not as good as the actual bulge brackets.
I agree that it is too soon to tell but why wouldn’t you say it’s not as good as some of the lower BB’s that it beats out in league tables?
I stay away from “ranking” banks or talking about prestige much, so I’m not the best person to ask – you may want to go to WallStreetOasis and see if anyone there has views on this one.
His offer is for their IBD side… they appear to be working on really big deals, but their name recognition (in terms of exit)?
You won’t be able to get into KKR etc. coming from there but can get into plenty of smaller places
Which bank are you referencing to? And by smaller places do you mean MM PE funds or like… no name small.
He was referencing a well-known but not extremely large PE firm. And yes you could move to other well-known funds from that.
Hi! I am currently a junior looking for an internship opportunity in Investment Banking. I am confused whether I should apply at a bulge bracket or a boutique firm? I am an international student on a F-1 visa. I am double majoring in economics and mathematics and also doing a minor in business. The more I talk to people the more I get scared of ending up not get any job/internship because of my 3.3/4.0 GPA and F-1 visa status. But, I know if I get any interview I can talk about my two jobs I am doing right now along with my school to cover up my low GPA part. Please suggest me how should I go about networking boutique/bulge bracket firms and getting an internship in summer 2010. Thanks
I would apply to both – why would you limit yourself to just 1? Focus on larger banks first and if nothing works out, switch to aggressive networking / cold-calling boutiques.
Great site.
I am 45 years old and looking to break into Investment Banking. I was always told to make Private Equity your last job..not your first. To go out and actually do something before you start trying to qualify deals!
I have an MBA and significant ’strategic’ financial experience. I am not a CGA/CFA/Etc.
I have ‘done’ many things including working at the senior exec level at a couple of Fortune 500’s. I built Canada’s first Diamond mine and managed a 3.5B dollar upstream oil & gas project. I was named as one of the 12 most influential people in the Alberta oil industry by the National Post (they were drunk) and I have participated in at least a half a dozen start-ups. Does any of that shit matter or will I be fighting for entry level positions with the kids?
I’m up for it either way I just want to know what I’m up against! : )
MG
Your best bet is to try to join a PE firm as an Operating Partner – there is no way they will hire you as an Analyst or Associate if you have 20+ years of experience.
The Ekati mine? I’d recommend you talking with Kern Equity Partners in Calgary. What year were you named one of the 12 most influential people in the AB oil industy?
SMS
where can I find a list of boutique investment banks?
http://breakingintowallstreet.com/biws/networking-ninja-toolkit-2-0/